Toronto, Canada – The Canada Pension Plan (CPP) provides a taxable monthly retirement benefit to help replace a portion of individuals’ employment income after they retire. Typically, individuals can start receiving the CPP at the age of 65. However, the Canada Revenue Agency allows for early payouts starting at age 60 or delaying until age 70.
When individuals choose to advance the CPP payment, the payout reduces by 0.6% each month. Conversely, delaying the payment increases it by 0.8% per month. This means that individuals who start the pension at 60 will see a maximum 36% reduction, while those who begin at 70 will receive a 42% boost in their retirement benefits.
In 2024, the average CPP payout for a 65-year-old starting retirement is $831.92. For individuals starting at 70, the benefit increases by 42% to $1,181.32. While the CPP offers a steady income stream, it may not be sufficient for a comfortable retirement, especially in cities like Toronto and Vancouver where living expenses are high.
To supplement CPP payouts, retirees in Canada can explore various income streams. One option is to invest in Guaranteed Investment Certificates (GICs), which have become attractive due to recent interest rate hikes. GICs allow individuals to deposit money with banks or financial institutions and earn interest on the principal.
For those with a higher risk tolerance, investing in quality dividend stocks can provide a passive-income stream for life. It is essential to choose stocks with a proven business model and a history of performing well across different market cycles. One example is Enbridge (TSX:ENB), a TSX dividend stock that offers a yield of over 7.5% and has increased its payouts for 29 consecutive years.
In addition to dividends, Enbridge stock also generates returns in the form of capital gains. Over the past 20 years, Enbridge has delivered 265% returns to shareholders, with even higher cumulative returns after factoring in dividends. Diversifying income streams through GICs and dividend stocks can help Canadian retirees enhance their financial security in retirement.